Caution has been the name of game for the past few months. In late 2018 we started seeing signs that the record long bull market might be coming to an end, and recently — from a technical analysis perspective at least — we saw international markets moving into a bear phase. This changes how we need to approach the markets, at least from a short-to medium-term perspective. A cautious and conservative approach should be adopted. But we have to balance the need for caution with the obligation to take risk, to generate returns. This is where relative plays become useful. Last month we traded a relative pair in a sector that has been outperforming the overall market. We traded a short position on FirstRand and a long position on Absa because on a relative basis Absa is outperforming FirstRand, while both stocks are in a sector that, at the time, was outperforming the top 40 index. Since then there have been some changes. The rand has weakened substantially and the financial 15 index has ...

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